Yet another CAN-SPAM preemption ruling, this one is also from the Northern District of California and it also involves veteran spam plaintiff Asis Internet! Of the recent decisions that have grappled with whether CAN-SPAM preempts the California spam statute I think this one gets it most right.

Background: Asis brought claims under CAN-SPAM and section 17529.5 (one provision of California’s spam statute) alleging that it received email sent by Member Source Media which had misleading header information and subject lines. The court dismissed the CAN-SPAM claims based on standing and now looks at whether the state law claims are preempted by CAN-SPAM.

The Court’s Ruling: The court acknowledges that Virtumundo did not address the precise issue before the court “i.e., whether a plaintiff must plead reliance and damages in order for its state law claim to be saved from preemption.” To resolve this question, the court looks to Judge Conti’s ruling in the Subscriberbase (which also involved Asis Internet) where Judge Conti found that a plaintiff was not required to plead the fraud elements of reliance and damages in order to escape CAN-SPAM preemption. (Here’s my previous post covering the Subscriber base ruling.) The court in this case is persuaded by Judge Conti’s reasoning, and similarly concludes that “Asis need not plead reliance and damages in order for its claim to be excepted from preemption.” However, the court notes Congress’s concerns about “frivolous lawsuits and the scope of plaintiffs allowed to bring suit against email advertisers.” The court also gives a nod to Judge Gould’s concurring opinion in Virtumundo which expresses concern that allowing anyone to sue could result in the creation of “litigation factories,” which Congress obviously did not intend. With this background in mind, the court turns to the specific header and subject line-based claims brought by Asis.

Header Claims: Asis argued that Member Source violated the header information prong of the California statute by sending emails from domain names such as “greenthe.com,” “consumerbargrewards.com,” and innocenttruthrevealed.com” Asis argued that it had to undertake a WHOIS search to find out where the emails came from, and many of the domains were registered through privacy protection services so these searches came up empty. Finally, Asis argued that certain internet protocol addresses used by the emailers were obtained through false representations because “the purported sub-lessee of the IP addresses, Frank Peters, provided a mailing address and Asis’ investigation indicated that no Frank Peters resided at the address.”

The court finds that these claims were similar to the claims brought by Gordon — i.e., they were premised on “technical and immaterial . . . header deficiencies”. To the extent Asis argues that domain names must somehow clearly identify Member Source, these claims are preempted under CAN-SPAM. The court contrasted Asis’s claims with the claims brought against Reunion.com, which another Northern District judge found were not preempted. In the Reunion.com case, the plaintiff argued that the emails purported to come from a friend or acquaintance but they actually came from Reunion. In contrast, in this case, there was nothing inherently misleading about the header information so the court rejects these claims.

Two quick notes here. First, Professor Goldman previously blogged about US v. Kilbride, a criminal case where the court cited to the use of privacy protection services as supporting the government’s case that the defendants violated the header information prong of CAN-SPAM. It’s nice to see the court reject (or give nothing more than a passing reference to) Asis’s argument that the email headers were somehow misleading under California law because proxy registration was used. Second, I’m not sure what’s up with plaintiffs repeatedly making arguments that “fanciful” or “random” domain names can’t be used to send emails. There’s nothing in CAN-SPAM (or any other spam statute) that says you can’t register a bunch of domain names that don’t incorporate the name of your company to send out emails. Companies do this (legitimately) all the time. To me, this whole line of argument shows how much plaintiff’s are trying to stretch spam laws when bringing claims. Kleffman v. Vonage is another case (certified from the 9th Circuit to the California Supreme Court) where plaintiffs make this argument, and Value Click filed a nice amicus brief [scribd link] that persuasively lays out why this argument is untenable.

Subject Line Claims: The subject line claims were based on subject lines such as “Wal-Mart 500 Dollar Gift Card Inside,” and “Second Attempt: $500 Target Gift Card Inside.” The court found these claims fall under the garden variety deception category (in contrast to the header information claims) and were not preempted.

End Result: The court finds the header information claim preempted and dismisses this claim with prejudice. The subject line claim is not preempted, and the court declines to exercise supplemental jurisdiction over this claim (Asis can pursue it in state court if it chooses to refile).

The court notes that this case has been going on for over two years. I wonder if Member Source will seek fees, which are available under CAN-SPAM. Fees were awarded against Gordon, the Virtumundo plaintiff. Asis in one of its own filings expressed concerns about its financial situation. It has lost a bunch of rulings over the years, but surprisingly, I haven’t seen much about people trying to seek fees against it.